Woolworths Holdings Limited. JSE: WHL

Background of Woolworths

Established in 1947, Woolworths Holdings is today one of the largest retail chains in South Africa, and also has operations in 11 other sub-Saharan Africa countries, Australia, the Middle East and New Zealand.

Woolworths shares were first listed for sale on the Johannesburg Stock Exchange (JSE) in 1997, and the company is currently one of the top 40JSE-listed companies, with a market cap of around R100 billion, and has a strong Woolworths share price history. The group consists of three major operating division: Woolworths South Africa, David Jones (based and trading in Australia) and the Country Road Group (based in Australia and also trading in New Zealand and South Africa).

Woolworths South Africa is further split into Woolworths Clothing and General Merchandise, Woolworths Food and Woolworths Financial Services (a joint venture between Woolworths and Barclays Africa, providing direction on credit policy, risk, funding and customer integration). Overall, the group employs over 40 000 employees and trades in more than 1 300 stores.

Apart from department stores, the Woolworths brand incorporates a series of food stores, and some branches include in-store restaurants. The group targets mid to high-income consumers.

Woolworths Shares Growth Driver

Having established a strong foothold in the South African market, Woolworths has made significant diversification moves which have exposed it to overseas markets. In 2014, the group managed to buy Australian department store business David Jones for R10 billion, as well 12.12% of remaining non-controlling interest in Country Road.

This drove group sales up by 54.9% for the 2015 financial year, and 12.1% if the David Jones purchase is excluded. Profit before tax grew by 20.5% and headline earnings were up by 19.4%, with Australian businesses contributing 40% of earnings.

Despite tightened consumer conditions in South Africa, Woolworths Clothing and General Merchandise and Woolworths food both delivered strong performance, with respective profit growths of 3.3% and 25.6%. David Jones has performed much better than expected, producing adjusted profit of A$157 million in its first year with the Woolworths Group. Woolworths also notched up impressive financial data for the second half of 2015, with group sales increasing by 17.1%.

Woolworths Group Investor Tip

The company has identified excellent long-term potential in its markets, which will help it weather a forecast of continued economic uncertainty. Their upper income target market is showing resilience to the economic downturn, while the company will seek to benefit from sub-par performances from its largest competitors in South Africa and Australia.

The live online stocks chart shows that Woolworths share price has however declined recently, so the company has been impacted by the tough economic conditions, which are likely to persist for now. The company has a strategic edge in terms of diversification, scale and business execution, which have seen it delivering good earnings for those who buy Woolworths shares. Woolworths has a sound, forward-looking business strategy in place, meaning that Woolworths shares could have the potential to be a good purchase as new plans come to fruition.

Woolworths Major Shareholders

Sector

Consumer Staples

Industry

Retail – Consumer Staples

Sub industry

Food & Drug Stores

How to buy Woolworths Group Shares

Woolworths: How to buy Woolworths Group Shares Online

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